All posts tagged 401(k) Plans

In an era in which employers automatically enroll new employees in 401(k) plans, it’s not surprising that target-date funds, which typically serve as the default investment option, have soared in popularity.

Now, some employers are going to even greater lengths to get retirement-plan participants into target-date funds—which are diversified all-in-one mutual funds that reduce stock holdings and increase bond and cash positions as employees age and come closer to retirement.

Consider the State of Illinois’ deferred-compensation plan. Read More »

The portion of defined-contribution plans that charge retirement savers for record-keeping through fund-based fees fell to just over half this year from 83% in 2011, according to a survey released this week by Aon Hewitt.

And 26% of plans charge record-keeping fees as a line item to participants, up from 14% two years ago.

The good news, as detailed in a story in today’s Investing in Funds & ETFs report, is that 401(k) savers whose plans break out the fees for administrative expenses can see exactly what they’re paying. And more 401(k) plan sponsors are working to make sure that some savers are not paying proportionately more than others. Read More »

Having a good attitude about saving for retirement turns out to be key to socking more money away, according to a poll of 1,011 Americans conducted for BlackRock, the world’s largest asset manager.

The upshot: Workers who feel empowered, confident and positive about the retirement-savings process will save more than those who don’t – and workplace retirement plans such as 401(k)s play an important role.

Among the people who agreed that they could save for retirement while also meeting daily expenses, 46% were saving at the highest level, defined as 11% or more of annual household income. Among those who disagreed, a mere 17% had savings that great. Read More »

BlackRock claims ownership of the oldest iteration of what has become a common default option in 401(k) retirement-savings plans – the target-date fund. Such funds typically are designed to move from more-aggressive to more-conservative investments as workers near retirement, so that they don’t have to worry about reallocating assets on their own.

On Oct. 31, 1993, LifePath Portfolios made their debut. As of June 30, target-date funds have $540 billion in assets, according to the Investment Company Institute. Those 20 years have seen other big shifts in workers’ thinking about saving for retirement, BlackRock points out. Two decades ago, investors largely thought of 401(k) accounts as supplemental to pensions; now, 401(k)s are central to retirement. Read More »

In light of a legal settlement reached today between International Paper Co. and its 401(k) participants over allegedly high fees, you may be wondering whether what you’re paying for your retirement plan is in line.

The International Paper workers alleged in a claim filed in 2006 in U.S. District Court in East St. Louis, Ill., that International Paper’s 401(k) plans used a company-stock fund as an investment choice, paid “excessive” fees for record keeping and investment management, “fraudulently” reported performance histories for the plans’ funds, and improperly delayed contributions to the plans and retained interest earned on those contributions for corporate accounts, according to the preliminary settlement agreement.

International Paper denied all the claims. It said that the fees paid to the plan’s service providers are “prudent and reasonable,” and that its 401(k) plans have offered “a broad portfolio of prudent investment options,” according to the agreement. Read More »

“This conference will engage key stakeholders, policy makers, advocacy groups, employers, and the financial service industry in a critical discussion about how to increase retirement savings. The conference will explore: Read More »

Today’s story about a Yale Law School professor who mailed some 6,000 letters to employers who sponsor 401(k) plans has sparked an intriguing discussion about such fees among executives in charge of their companies’ plans.

Ian Ayres, the professor, said in the letter that he would publicize a study of employers’ 401(k) plan costs.

One of the big points that readers’ comments underscore: Although the fees charged are important, you also have to weigh the investments’ performance against the fees. Read More »

President Barack Obama’s proposal to cap tax-deferred retirement contributions at $3.4 million is raising a lot of questions among financial planners.

And it already has generated at least one idea for a new estate-planning strategy.

First, in case you missed it: The president’s budget proposal for fiscal 2014, released Wednesday, includes a lifetime cap on savings in individual retirement accounts and other tax-deferred savings vehicles, including 401(k) plans and profit-sharing plans.

When President Obama rolls out his 2014 budget proposal this week, it is expected to include a lifetime limit of $3 million on savings in individual retirement accounts and other tax-deferred retirement-savings accounts, such as 401(k) plans.

As of Dec. 31, 2011, about 0.03% of 20.6 million IRAs had more than $3 million in assets, EBRI found. It released a report with the results today. About 0.06% of total account holders (some people own more than one account), and about 0.11% of account holders who are age 60 or older, surpass the threshold. Read More »